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FACTBOX: South Korea's industrial park in the North

(Reuters) - North Korea said on Monday it had agreed to resume normal land passage across its heavily armed border with the South, all but blocked late last year.

The move will allow traffic to resume to the Kaesong industrial park operated by South Korea just across the border but which has been under threat after Pyongyang demanded increased payments.

Here are some facts about the park, where South Korean companies use cheap North Korean land and labor to make goods:


Just over 100 small to medium-sized South Korean companies employ nearly 40,000 North Korean workers to make low-tech products such as cooking pots, clothes, shoes and watches. The companies receive tax breaks and other incentives from the South to set up there and pay workers a minimum monthly salary of $70.


The project, which began construction in 2003 and is run by a Hyundai Group affiliate and the South’s Korea Land Corp, was designed to serve as a model of future economic cooperation between the states, which have not formally signed a peace treaty to end their 1950-53 war. South Korea’s leaders envisaged the park eventually employing more than half a million North Koreans working at 2,000 firms while adding a peace park and hotels.


Wages and other fees paid by the South in hard cash go directly into the coffers of the North’s leaders. Critics say the park allows the North to exploit the Kaesong workers for its own benefit with funds generated there helping Pyongyang pay for its various weapons programs.


At the end of last year North Korea began to restrict traffic over the border, making it more difficult for goods and workers from the South to enter. In May, North Korea said it was cancelling all wage, rent and tax deals at Kaesong in what analysts said was a hard-nosed negotiating ploy to squeeze more money out of the South. The North late last week released a South Korean worker it had held there for about five months for defaming the North’s leaders. In June, a South Korean firm became the first firm to pull out of Kaesong, saying the turmoil led to its decision.


The South Korean built park is located about 70 km (45 miles) northwest of Seoul. A new highway and restored rail link run through the Demilitarized Zone buffer dividing the two since the end of the Korean War, taking materials to and from the park. The fenced-off park, with its new buildings, paved roads and steady supply of electricity from the South, marks a stark contrast to the North’s impoverished city of Kaesong, with its dilapidated buildings and broken down infrastructure.


There have been plans to significantly increase the size of the industrial estate, employing more than double the current number of workers. While that would be a big boost for Pyongyang’s drained coffers, it would also pose a risk for intensely secretive leadership. Analysts say the local Kaesong area could not provide enough additional workers and the government would be forced to bring in labor from elsewhere in the country, and so make more of its population aware of the huge wealth gap with wealthy South Korea.

Reporting by Jon Herskovitz, Christine Kim and Jonathan Thatcher